ABSTRACT: This article begins by laying out a simple framework that makes obvious
the incentives at play in generic drug entry, brand challenges, and
settlements between the two. Once this common understanding has been
established, several rule changes that have taken place are
summarized—one in the form of an amendment to Hatch-Waxman and another
in a recent decision by the Court of Appeals for the Federal Circuit.
These institutional changes may have the consequence of reducing the
prevalence of reverse payments.

This possibility suggests a
different policy tact might be called for, one that shifts emphasis
from determining whether or not reverse payments should be per se
illegal to working with the incentives that firms already face and
exploiting those incentives to reduce firms’ inclinations to enter into
anticompetitive reverse-payment settlements.